Google as Cable TV Provider Makes a Lot of Sense

By Tony Rizzo

TMCnet Senior Editor

On July 25, 2012 a project known as Google (News - Alert) Fiber, which Google built for about half a billion dollars, launched in Kansas City, Kansas (and should be followed by a launch in Kansas City, Missouri in September 2012). Google Fiber delivers bi-directional Internet connectivity at 1 GPBS, or about 100 times faster access than most Americans have, which averages out to approximately 4 MBPS. That is one very fast network.

As our colleague Rich Steeves points out in his own take on Google Fiber, One Step Closer to World Domination? Google Wants to Be Your Cable Provider, Google is not merely launching this as an experiment, nor is it taking a Field of Dreams (If you build it they will come) approach. Rather, as Rich points out, Google is betting that as soon as the services are turned on (supposedly for an eminently affordable $70 per month for Internet service and $120 per month including TV) users will make huge demands for services – among them TV channels and TV content. It is a view we certainly concur with. There is also a free low speed Internet option that requires a onetime $300 “construction” fee – a fee that is waved for both the high speed Internet and TV packages.

In anticipation of this demand, Google is now saying that it will indeed become a cable provider – or more accurately for now, a provider of TV content. The channel list is substantial if not yet quite complete – and the TV package also includes a free Nexus tablet, which will also serve as the TV service remote control. The interesting twist on Google’s bet that user demand will be there is that Google will only turn the services on for the different existing communities within Kansas City if there is indeed enough end user demand within each community for the service. Google will come with TV in hand, but only if you call them.

It will be very interesting to see how YouTube (News - Alert) (remember, this is also a Google service) will evolve as a result of Google having a powerful (or potentially powerful) video distribution capability. It will also be interesting to see how Google implements search capabilities to play with the video distribution services. Even more interesting will be the evolution of Google Now – will it be able to discern user TV viewing patterns, make recommendations for both TV an YouTube channels, and so on? Will it lead to successful monetization strategies for YouTube? Will it connect TV watching with retail buying patterns?

Hey, I see you are in the video store and I now know you love Mad Men – the store is having a sale on the entire boxed set right now, and by the way here is a 15 percent additional discount coupon you can use today – simply use your Nexus NFC-enabled mobile payment capability to automatically apply the coupon.

The store and Google may end up sharing transactional revenue – the store might gain a sale it otherwise would never have had, and Google adds incremental revenue which can become substantial in volume.

The new Google TV services begin to demonstrate revenue possibilities not just for Google but for others, and we like to think that Facebook (News - Alert) can be a player here. How so?

A key means for Facebook to monetize its already vast store of user/subscriber knowledge is to apply it to TV-based advertising. It may ultimately make sense for Facebook to acquire a major broadcasting service – a major network such as CBS could easily be in reach of Facebook – in order to place targeted ads based on its extensive knowledge of what its users (and their friends) like and prefer. It isn’t something that would happen overnight but it certainly is something to consider as a Facebook opportunity over the next several years.

That leaves the other two heavyweights to consider – Apple and Microsoft (News - Alert). We’ll be watching them closely for any hints on how they are likely to react.

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Tony Rizzo has spent over 25 years in high tech publishing and joins TMCnet after a stint as Editor in Chief of Mobile Enterprise Magazine (News - Alert), which followed a two year stretch on the mobile vendor side of the world. Tony also spent five years as the Director of Mobile Research for 451 Research. Before his jump into mobility Tony spent a year as a publishing consultant for CMP Media, and served as the Editor in Chief of Internet World, NetGuide and Network Computing. He was the founding Technical Editor of Microsoft Systems Journal.